Me: >> In standard accounting, a government's net worth = estimated market >> value of assets (to the government) minus estimated market value of >> debts.
John V: > ... standard accounting is based on the > assumption that worth is realizable. Accounting wouldn't make sense if > it didn't. This kind of worth isn't a fait accompli but depends on > defining future activities, that themselves will become determined at a > later time. The economy is a dynamic process that eludes any kind of > static determination of its components. _Of course_ net worth is not a "fait accompli." (Name someone who thinks otherwise. I'm not one.) Actual accounting is based on a lot of imputations and assumptions. Worth is _assumed_ to be realizable before it is actually realized. Thus, I used the word "estimated" above. Somehow that word was totally ignored. While the economy is dynamic, that doesn't mean that accountants can't capture "snap shots" (descriptions of the "static determinants of its components"). That's what they're paid to do. An analogy: in the middle a basketball game, the "static determinant" would be the current score. That's relevant even though the score will change in the near future. It helps with projection of the future score. > You not only assume what still needs to be proven, but use that as a > basis for extended reasoning; i.e. your "net worth" is axiomatic. That's right: like many accounting concepts, net worth is a definition (and not the result of some model or theory) and the actual net worth is calculated based on that definition. It's not a theory or a model. The score in the middle of the game does not describe the process of play, the strategy of the coaches, the skill of the players, etc. > It's > beyond logic and both impossible to "understand" and persuade anyone who > doesn't already hold the same belief. Perhaps that's true among the dogmatists. > Furthermore, by stating that "net > worth should be emphasized instead of debt", how do you avoid the trap > of thereby assuming that the economy is statically in equilibrium and > Say's Law rules? That's totally illogical. Accounting has nothing to do with economic theory (such as that behind Says' "Law") even though it can help in the creation of a theory. It's like blaming the Fahrenheit system of measurement of temperature for the theory of phlogiston. Or thinking that someone who pays attention to the current score (Lakers 90, Clippers 80) will always assume that the Lakers will automatically win. (of course, any rational person would predict that the Clippers will lose, based on past experience.) In sum, accounting is not the same thing as economics, even though they influence each other. I gotta go. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
